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The gym rats who join the still-under-construction recreation centre in central Denver, Colo., will owe their workouts to weed smokers.

In Pueblo County, south of Denver, students will soon be able to walk to school on a sidewalk paid for by marijuana tax revenue, or apply to the world’s first cannabis-funded scholarship program.

“We’re taking dollars that were previously going to drug cartels in Mexico and using them to provide opportunity and education to the next generation,” says Pueblo County Commissioner Sal Pace. Elected officials there recently approved the use of $2.5 million U.S. in pot taxes to fund a mix of community projects.

As Canada prepares to legalize marijuana, cash-strapped governments at every level across the country are eyeing the potential tax revenue recreational pot might generate.

In Toronto, where the 2016 budget process is underway, many councillors, fearing voter backlash, are loath to raise or impose new taxes, even so-called sin taxes, while the city falls behind in its ability to fund public services.

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But in Colorado, one of four U.S. states so far to legalize pot for recreational use, voters and lawmakers have embraced the idea of collecting taxes from its sale.

In a statewide vote last November, 69 per cent of voters even rejected refunds after the state collected an unanticipated $66.1 million in pot sales tax revenue. Instead, $40 million went to school construction and $12 million to youth and substance-abuse programs. The remaining $14 million went into a discretionary fund, according to the Denver Post.

Fixing roads, building sidewalks and funding post-secondary school scholarships with pot tax revenue “was never something I thought would be a reality in my time in government,” says Pace.

“It’s a bit surreal.”

But marijuana-related tax revenue — projected to pump $28 million into Denver’s coffers this year — is no fantasy, says Tyler Henson, president of the Colorado Cannabis Chamber of Commerce.

“That extra tax revenue the cannabis industry is bringing in is very helpful for the state of Colorado and the cities,” says Henson, who calls his organization a “pro-business association for the marijuana industry.”

In 2014, when there were financial difficulties with the construction of a Denver recreation centre, the city made a one-time allocation of $3.2 million toward the $33-million facility — after months of collecting higher-than-expected retail marijuana revenue. Shovels went into the ground late last year.

“I would never say that single-handedly legalizing recreational cannabis would be the solution to every government’s problem,” Henson adds. “But it’s a good tool to have, and it can alleviate some problems especially, if a city or a county is looking at a budget deficit.”

Ashley Kilroy, executive director of marijuana policy for the city and county of Denver, said pot revenue is prioritized toward regulation, education, enforcement and public health, while excess revenues go into general revenue to pay for city services.

However, that’s “a very small portion of the overall city budget,” she wrote in an email. Marijuana revenue constitutes only 2.3 per cent of the city’s general revenue fund.

All retail marijuana and related products sold in Denver are subject to a general city sales tax rate of 3.65 per cent, plus a special 3.5 per cent sales tax, for a combined 7.15 per cent.

To ensure robust regulation of pot and responsible implementation of legalized sales, “it takes a significant dedication of resources, and that costs money,” she wrote. “There should not be an expectation that marijuana revenue will make a city flush with cash.”

Mason Tvert, director of communications with the Washington, D.C.-based Marijuana Policy Project, says some jurisdictions in Colorado and other legal pot states aren’t limited to imposing sales taxes.

The state also allows local government to regulate “social consumption venues,” which pay licensing fees.

As of June 2015, more than 21,000 Colorado residents held valid occupational licences to work in marijuana-related businesses. Those businesses employ workers and use services from other sectors, such as construction, legal, insurance and real estate.

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